Weaker Japanese and Chinese Share Prices

March 28, 2013

Equities slumped 3.3% in China on fear of more property market curbs. Weakness was concentrated in financials. The decline occurred in spite of data showing a strong 17.2% on-year advance in Chinese corporate earnings.

The Japanese Nikkei fell 1.3% on the next to last day before the end of the fiscal year. Bank of Japan Governor Kuroda spoke said it would be hard to implement a purchase program of foreign bonds. Japanese retail sales posted a 2.3% on-year decline in February, the largest drop in fifteen months, but such were 1.6% higher than in January. Large-store sales posted back-to-back on-year declines of 3.5% in January and 3.7% in February. Japanese stock and bond transactions generated a JPY 112 billion net capital outflow last week after a JPY 943 billion inflow in the week of March 16.

Banks reopened in Cyprus, protected in part by newly imposed capital controls that will be assessed on a daily basis.

Italy’s inability to form a governing coalition deepened, increasing the chances of another election soon and raising the anxiety level in market attitudes toward that country and the future of the euro.

German data released today were mixed. Unemployment rose by a greater-than-forecast 13K in March. Such was the first increase since November and the largest rise since October. Job vacancies fell 4K, and the jobless rate stayed at 6.9%, its level since October. German retail sales volume, on the other hand, rose 0.4% last month (analysts anticipated a 0.5-1.0% decline). Nonetheless, sales were 2.2% weaker than a year earlier and just 0.2% higher in January-February than a year before.

Euroland’s retail purchasing managers index fell by 0.8 points to print at a ten-month low of 43.7 in March. Germany’s index stayed below the 50 threshold between expansion and contraction for a second straight month, albeit just barely at 49.9. The French PMI plunged 4.3 points to an all-time record low of 40.1 and was even weaker than Italy’s 40.3 reading.

Dollar movements are pretty insignificant. Not only is quarter-end approaching, but so too is the long Easter holiday that will shut many markets tomorrow and Monday. The U.S. currency fell 0.3% against the yen, 0.2% versus the kiwi, euro and Swiss franc, and 0.1% relative to sterling. The dollar firmed 0.1% against the Australian dollar and is steady versus the yuan and loonie.

Equities fell 0.7% in Hong Kong, 0.4% in Taiwan, 0.6% in Australia and 0.2% in Singapore but rose 0.7% in India and 0.4% in Malaysia. In Europe, stocks are down 0.5% in Spain but up 0.5% in Italy, 0.2% in Germany and Britain and 0.1% in France.

The 10-year JGB yield slipped a basis point to 0.51%, just 7 basis points above the record June 2003 low. The 10-year German bund is also off a basis point, while the 10-year British gilt is unchanged.

Gold and oil prices edged up by 0.2% and 0.1% to $1604.20 per ounce and $96.72 per barrel.

M3 money growth in the euro area slowed to an on-year pace of 3.1% in February from 3.5% in December and January. The smoothed three-month average on-year increase, which ECB analysts prefer to watch, eased to 3.3% from 3.5%. Loans to the private sector were 0.9% lower than in February 2012 and included a 2.6% drop in lending to non-financial companies.

British consumer confidence remained weak with an unchanged March reading of minus 26. The Nationwide index of British house prices was unchanged on month and 0.8% higher on year in March. Britain’s index of service-sector activity firmed 0.3% in January but was 0.2% lower in November-January than in the prior three months.

Italy’s business sentiment index rose 0.3 points to 88.9 in March, surprising analysts who’d expected a drop of around 0.5 points instead. Belgian CPI inflation eased to 1.1% in March from 1.2% in February. The Greek trade deficit widened 74% to EUR 1.9 billion in January from EUR 1.1 billion in December.

Australian private credit was 3.4% higher than a year before in February, slowing from a 3.6% advance in January. Expected Australian inflation slowed to an 8-month low of 2.1% in March from 2.4% in February. New Zealand building permits rose 1.9% in February after a 0.4% dip in January.

South Korea will be unveiling extra fiscal stimulus next month. The economy had a $2.7 billion current account surplus in February, reflecting a $2.56 billion merchandise trade surplus. Vietnamese GDP growth of 5.0% in 2012 was the lowest in 14 years. GDP in 1Q13 was 4.9% higher than in the first quarter of last year.

The final revision of U.S. 4Q GDP is due today, along with jobless insurance claims, the Kansas City Fed manufacturing index, and the Chicago and Milwaukee regional purchasing managers surveys. Canada reports monthly GDP, PPI, and raw material price data. While much of the rest of the world will be observing a religious holiday, Japan is scheduled to release a ton of monthly data on Friday and the quarterly BOJ Tankan survey on Monday. The first BOJ Board meeting of the Kuroda era happens next week as well.

Currency Thoughts has evolved from a blog to a full-functioning website. This new design provides easier access to your favorite features and new capabilities to accept ads. In the future, it will be possible to register to accept emailed updates.